Opening speech by President Ilham Aliyev at a meeting of the Cabinet of Ministers on the results of socioeconomic development in the first half of 2010

The first six months of 2010 are now in the past and we will traditionally discuss the results of the first half-year today. I can say that, as was the case last year, this year too Azerbaijan continued its successful economic development. Although the financial and economic crisis had a major impact on global processes last year, Azerbaijan achieved very good economic indicators in 2009. In 2010, these positive trends have continued, there is development and progress in all our economic sectors. These figures show again that economic reforms in Azerbaijan are conducted in the right direction. In the first six months, economic growth constituted 3.7 per cent. Considering the fact that economic development was very high last year, this is a very good indicator. In general, economic development in Azerbaijan is multi-faceted. As you know, we are now focusing on the development of the non-oil sector.

This is a priority for us. As for the oil and gas sector, the successes we have achieved in it are sufficient and, perhaps, we should preserve the current production rate.

Positive trends in the development of the industrial potential have been continued. If we divide our industrial potential into two parts, we can see that growth in the oil sector was 2.4 per cent, while in the non-oil economy 15.3 per cent. This is a graphic example of the work we are doing. The reforms carried out in Azerbaijan to date, namely the steps towards developing the non-oil sector, have ensured the present-day realities. Special attention will continue to be paid to the non-oil sector.

The more than 15-per-cent growth in the non-oil sector is evidence that the Azerbaijani economy is diverse. Our goal was to successfully use the oil factor for the development of all spheres of life in Azerbaijan, and we have achieved that. In the coming years, we must strengthen these tendencies. We must ensure that the Azerbaijani economy reduces its dependence on the oil factor for many years and decades to come.

Other economic indicators are also evidence of a positive picture. Inflation was 4.9 per cent. This is a normal level. Population incomes have increased by nine per cent. This shows again that although 2009-2010 will go down in history as a period of crisis, the incomes of the Azerbaijani population are growing and are ahead of inflation.

There are major financial resources in the country. Thanks to our successful oil policy, Azerbaijan is expanding its financial capacities. Since the beginning of 2010, Azerbaijan’s currency reserves have increased from $20 to 24.7 billion. These are our strategic reserves, and they are enabling us to resolve all issues by relying only on ourselves, to implement any economic infrastructure projects. The establishment of such major reserves has been made possible by the reforms conducted in the oil and gas sector, transparency, and the fact that we have joined all progressive transparency initiatives. This is an asset of the Azerbaijani people. As you know, the public is regularly informed of the Oil Fund’s revenue and expenditure. It is a very transparent organization. Azerbaijan is referred to as an exemplary country for management and fair distribution of oil revenues. Of course, the experience we have gathered and the work done in this sphere give us confidence in saying that Azerbaijan’s strategic reserves will continue to increase. Of course, these reserves will ensure Azerbaijan’s successful development and independent policies because economic independence is the key precondition for political independence.

In 2010, Azerbaijan has continued its successful policy towards attracting investment. Although almost all financial institutions, international companies and countries are sharply reducing their expenses, investment in Azerbaijan is still ongoing, and we have observed that this year too. In six months, a total of $3.8 billion has been invested in our economy, and some of this is foreign investment. In previous years we depended more on foreign investment. The favorable investment environment in Azerbaijan has facilitated the influx of investment. For the volume of direct foreign investment per capita, Azerbaijan has always held leading positions in this region.

Today our financial capacities, national revenues and currency reserves established thanks to foreign investment, and our strengthened economy are enabling us to increase the volume of domestic investment every year. A total of $3 billion out of $3.8 billion is made up of domestic investment and resources invested within state programs and as a result of operation of Azerbaijani companies. And it is very gratifying.

The companies operating in Azerbaijan’s private sector today are growing stronger. The Azerbaijani state is supporting them. State companies are switching to a modern system. Azerbaijani state companies are applying modern accounting, audit and management systems. We support these processes and our strategic objective is to enable all state-controlled companies to operate as international companies. Their affiliation to the state should not mean that they must be managed by the state. Market economy principles are widespread in Azerbaijan and state-owned companies representing strategic importance should operate as commercial companies, access international markets and continue their investment projects there.

In other words, the key indicators demonstrating economic development are positive. Development is being secured and I am sure that Azerbaijan will continue developing successfully for many more years.

As always, we are paying special attention to social issues. All the programs scheduled in this sphere are implemented on time. There are no delays and we are doing this work in line with the program and on schedule. I can say that as of today the average monthly wage in Azerbaijan is about $400. It grows every year, and growth has been observed in the first half-year as well. The average pension is around $130. There is growth here too. But, of course, we must continue raising pensions, and we will discuss that today. Specific work is being done on establishing the entire social infrastructure – hospitals, schools, sports and culture facilities. The wonderful social infrastructure facilities opened in Baku and districts in the first half-year are a graphic example of that.

The program on the development of districts is successfully under way. The creative and improvement work under way in districts is already a reality. There is development in every district of Azerbaijan, socioeconomic programs are being realized, investments made, and Azerbaijani districts are taking full advantage of these conditions.

But it is also true that all our districts are subsidized by the state. There is no district capable of surviving on its own. This is perhaps natural. But we must aspire to enabling every district to take advantage of its specific geographic and territorial opportunities to provide for itself thanks to local production.

Of course, the state will continue providing these subsidies. This is the aim of infrastructure projects and subsidies to agriculture. The loans allocated to the private sector are already yielding wonderful results.

Every region has its own very detailed program. We must further increase the national revenue of districts and the gross domestic product (GDP) even further in the coming years. Although the GDP has risen three to four times in a number of districts, the reserves are still quite extensive. We must use these reserves with maximum effect.

A total of 36,000 jobs were created in Azerbaijan in six months of this year. In general, the program on the development of districts and income generation, announced in 2004, is successfully under way. Over the last six years, about 900,000 new jobs were created in Azerbaijan, including 600,000 permanent ones. Of course, some jobs are closed, but this is a natural process. Some companies simply cease to exist. In general, Azerbaijan is successfully resolving the problem of unemployment. Very important steps are being taken to eliminate it.

Today, we are paying special attention to import-substituting production. We have practically resolved all issues relating to food supply. Unresolved issues will also be resolved. Thus, I want to repeat, comprehensive development of our country will be ensured.

Our work in the oil and gas sector is progressing on schedule. The planned rate of production will be ensured. In six months, 25 million tons of oil and 13 billion cubic meters of gas were produced. As you know, most of this oil is exported and the inflow of currency to Azerbaijan is ongoing. I believe that production-related work is organized very well. Of course, as in any other sphere, we occasionally revise our policies in this sector. I think the present level of production is quite acceptable. But in the future, considering different factors, we can certainly both increase and decrease production. We must use our natural resources most rationally. Considering the great demand for our natural resources in Europe and in the world, we may, by taking some additional measures, increase production in a short time. All this is in our hands, we can regulate production as we wish.

Development in other spheres is also producing a good impression. Azerbaijani economy is sustainable. In 2009, despite the crisis, international rating agencies raised Azerbaijan’s credit rating. This is evidence that our reforms are very successful. Our economic development does not depend on the development of only one sector. Our aim is to modernize the country and bring the most sophisticated technologies here. The most advanced experiences must be applied to all economic and industrial sectors of Azerbaijan. Highly-qualified professionals must be trained. Our country will continue developing successfully. We have natural resources, an economic policy, and this policy is successful. International financial institutions are giving a positive assessment to the work done in Azerbaijan in this sphere. This is an assessment reflecting reality. Therefore, we will ensure a long-term development strategy of our country.

We are building up our defense potential. As you may know, the state budget has recently been amended and is now at a level of $15 billion.

An additional $500 million has been allocated for military issues. This is part of our targeted policy because we are at war and should therefore pay special attention to the strengthening of the country’s defense potential. And we are doing that. Today Azerbaijan’s military expenditure is $2,150 billion, which is more than Armenia’s total budget. We have reached the goal we established several years ago. This enables us to further modernize our army, import the most state-of-the-art weaponry, ammunition and hardware, and create a powerful defense industry. We have done that in a short period of time.

Our military power may prove crucial in the resolution of the Armenian-Azerbaijani conflict over Upper Qarabag. Although we don’t want it to and are trying to resolve the issue through negotiations, our military power certainly makes our position stronger. In a recent meeting with the Azerbaijani community of Upper Qarabag, I expressed my views on the Armenian-Azerbaijani conflict over Upper Qarabag. I want to emphasize again that all our activity in this sphere is transparent, open and unequivocal. The Azerbaijani people are regularly informed of the talks. This is our nationwide cause. The Azerbaijani people have expressed their wish. The Armenian-Azerbaijani conflict will be resolved in line with the wish of the Azerbaijani people. I repeat that this is our nationwide cause, and the Azerbaijani people will have the final say.

Today I want to touch upon another issue. I want to reiterate that Azerbaijan’s territorial integrity has never been and will never be a subject of negotiations! The suggestion tabled by mediators is that Azerbaijan’s territorial integrity must be restored, Armenian forces must withdraw from all occupied districts, Azerbaijani IDPs must and will return to their native lands, including Upper Qarabag.

As for the future status of Upper Qarabag, no status can be provided without the consent of the Azerbaijani state. This is an integral part of talks, i.e. Armenia, the notorious Upper Qarabag separatists or a third party cannot unilaterally, without Azerbaijan’s participation and consent, provide Upper Qarabag with any status. I can say that this is one of the key issues, practically the gist of the talks. Therefore, when the Armenian side says that Upper Qarabag will one day become independent, this is their fantasy and wishful thinking. Nothing else. The document on the table explicitly says everything about the definition of status for Upper Qarabag. I want to repeat that the Azerbaijani state will have its say and our say will be final.

The Azerbaijani state and people will never provide Upper Qarabag with a status capable of alienating it from Azerbaijan. There is no and cannot be any mechanism in the talks that would envisage a possible alienation of Upper Qarabag from Azerbaijan.

Therefore, I want to stress that Azerbaijan’s territorial integrity will never be a talking point. Azerbaijan is involved in the talks only on the basis of these principles. These are democratic principles. These principles reflect respect for the territorial integrity of countries and express an attitude to the issue of self-determination of nations. But these two factors must not contradict each other. Issues of self-determination of nations may be successfully resolved within the framework of territorial integrity of countries. There are many examples of that in the world, including Europe. And we want the most advanced experiences to be applied to every sphere of life. There should be no discrimination with regard to this conflict. These principles form the foundation of the Azerbaijani state. Our position will not change.

In parallel, let me say again that we are building up our military power and will continue to do that. As you know, significant resources are being allocated for military issues. Why are we doing that? This is obvious. We must be prepared to free our lands from occupiers at any time. I am absolutely sure that Azerbaijan does have such capacity today. We have considerably enhanced our military power and will carry on doing that. Our financial capacities are allowing us the opportunity to do that. These financial capacities have been created by us, the people of Azerbaijan and our policy. If the Contract of the Century hadn’t been signed in 1994, Azerbaijan’s successful development would be out of the question today. We have successfully, wisely and prudently used this factor and strengthened our country.

Some circles in Armenia think that they have won the first stage of the war. I think they have lost. Azerbaijan has covered a long and successful road in the years of ceasefire. We have reached great heights. Azerbaijan is a country enjoying tremendous international respect and playing a key role in the region. Not a single issue can be resolved without our participation. The unresolved status of some political initiatives in the region is further evidence that no issues can progress without our participation.

Azerbaijan must become one of the world’s most developed economies. We have set such a goal. We are a modern country. Therefore, the first stage of the war doesn’t prove anything. It only proves that the Azerbaijani people and state will never put up with this situation and will restore their territorial integrity at any cost.